What should business planning look like today? Forerunners have already been integrating their business planning for some time now. In doing so, they have been able to improve their competitiveness by having the capacity to respond to changes in the business environment and new opportunities more quickly than the competition. As integrated business planning gives companies a clear edge in competition, it is safe to say that it has become a necessary prerequisite for the continuity of business.
As a concept, Integrated Business Planning (IBP), or Extended Planning and Analysis (xP&A), the term used by Gartner, is already familiar to business executives. In a way, it is an extension and continuation of the Sales & Operations Planning (S&OP) concept, which is already being used by most companies that need to match production and demand as closely as possible. However, it is important to understand that with integrated business planning, the starting points for planning, the required business foresight and the scope of planning are of a completely different order of magnitude. IBP is certainly not just a tool or something that is merely related to the level of planning. What it takes is a change in the operating model and corporate management culture – and often a technological leap – before IBP’s competitive advantages come to their own.
Business executives are constantly facing an ever-changing and unpredictable world that throws unexpected challenges their way. If you had known a year ago that Covid-19 would not be over by May 2022, you would certainly have taken different decisions. Presumably, you did not consider Covid-19 in your business plans, but I would argue that you could have had comprehensive scenarios in place for similar unforeseen developments. However, natural disasters, financial crises or pandemics such as Covid-19 are a reasonably regular source of instability in societies and economies.
By simulating the future as quickly and flexibly as possible, you will be able to create avenues that allow you to adapt to the changing market and shocks in the business environment. This allows your business to be prepared for the future instead of being caught off guard by unforeseen events.
Business planning and forecasting lie at the heart of corporate management. This is the only way to ensure that the critical data which determines the fate of a company can be made to serve its purposes. As a result, it contributes to business continuity. In terms of outlining management policies, the insight provided by account-level information is limited. At best, it gives a rough financial framework to go by, but not many pointers for making changes or strategic choices.
Often, business planning is still siloed and discontinuous, leading to sub-optimisation between business areas and functions. This approach to planning may compromise the future of your business. IBP represents a completely different level of planning. With IBP, the fundamental idea is to project the activities of core business areas into the future while at the same time integrating the component plans and optimising all operations as a whole. Although integrating individual areas of business is one of the most daunting tasks in the efforts to adopt a more unified approach to planning, it offers your company a far better window into the future and a basis for making quick business decisions.
To achieve a shared vision of the organisation’s direction, KPIs and relevant scenarios, management needs to pull together. Any new model calls for systematic practice and guts to make changes. The goal is to create a management system conducive to generating a shared vision in a way that is both natural, unforced and efficient. Using the scenarios created from this underlying vision, management will be able to examine how the company’s revenue and profit, balance sheet and cash flow will be affected under a range of future circumstances. You can only imagine what an eye-opener it is to be able to build scenarios using a planning model that incorporates integrated plans for all key areas, such as sales, the supply chain, HR management and finance.
Some 10 years ago, the technologies used for business planning were very similar. The approach was largely based on account charts and finances, and thus supported primarily financial planning and data models. Today, IBP-compliant planning technologies permit agile planning of all aspects of business, including an easy way of building scenarios. They make it possible to harness machine learning and algorithmic capabilities for advanced analytical processing of business data, using methods such as mathematical optimisation or statistical anomaly detection.
Financial planning and budgeting solutions are point solutions, while the IBP technology platform is a complete business data solution. It makes it easy to view planning models flexibly from different perspectives and provides a convenient way for everyone involved in planning to participate and work together on the platform. Hence, integrated, collaborative and advanced analytics-based planning technology is one of the most important future investments that the executive management can make.
Companies that have already applied the IBP concept to their business planning report the following benefits:
Please get in touch to fix a meeting with us if this issue is topical for you or if you need help with the overall implementation of business planning in your company.